Conference 7.286::digital

    Did you try calling the IRS toll-free number?   They'll send you
    the form.   Also, most libraries have forms that can be copied,
    and they're practically guaranteed to have Pub. 17 which has samples
    of most forms.
    
    I learned a long time ago (when I got bitten by it) that submitting
    your return in January is risky.   Those places that generate income
    (your employer, banks, etc) have until the end of January to get
    you the forms.  It's only been rare that I didn't get something
    in the last week of January.   Now, I wait until mid-February to
    submit.   Much as I'd like to get my hands on the refund, it's just
    safer to wait.

    I believe it comes under "profit sharing".
    

I got the following explanation in the mail this week.  I'll post it
here without taking credit or blame for the content.  
    
                        Employee Stock Ownership Plan (ESOP)        02/01/88
                                    by
                               CSSE::KLABIS 

  By now everyone should have received the Form 1099-B from DEC that identifies 
  the added income for participation in the previous ESOP.  This is a quick 
  explanation that may be of some help.

  For many individuals with previously simple Federal tax returns, the ESOP is 
  going to complicate these tax returns.

  After reading the 1099-B that I received, and not being able to understand 
  just how the various numbers were derived, I called Investor Services 
  (223-7131) for an explanation of the various numbers with the following 
  results:
        
     Block #1) is a total of Block #2 and Block #3 (rather simple since Block #2
     is blank).

     Block #2) is blank since there are no capital gains.

     Block #3) Ordinary income.  This amount must be added to line 16b of the 
     1040 Form.  Now things get complicated!  Read the 1040 instructions (Page 
     11 for lines 16a and 16b) in the third column starting with "Lump-Sum 
     Contributions".  This amount may be entered on Schedule D as stated:  
     "However, you may pay less tax on this distribution if:  ---, or (2) you 
     were age 50 or over on January 1, 1986, and you are eligible to use the 
     special 5 or 10 year averaging method or ---."
       
     Block #4) Presumably blank since there should have been no taxes withheld.
       
     Block #5) Presumably blank since the employee has not made any 
     contributions.
       
     Block #6) Net unrealized appreciation in employer's securities.  According 
     to Investor Services "forget it" since this is irrelevant and is only put 
     on the form to satisfy the IRS.

     Block #7) Again irrelevant.
       
     Block #8) Blank.
       
     Block #9) Blank.
     
     Block #10) Blank.
       
     And there is a block identified as "Basis of your ?? shares is $???.??  
     per share.  This number does correlate (for the most part) with block #3.
     The explanation is rather nebulous however and is as follows:
       
       A) When the ESOP plan was closed out, each employee had an identified 
          amount of shares, including fractional shares.
       
       B) The fractional share was paid as cash, based upon the FMV (Fair 
          Market Value) of $162.25.  Multiplying this value times the 
          fractional share you have results in an amount called "F$", for 
          example.  According to Investors Services I had a fractional share 
          of 0.7846 times $162.25 for a total of $131.37. (This is different 
          than the $127.30 I calculate but this is their explanation, not 
          mine).  I am "open" to explanation on how this comes about.
       
       C) The whole shares in the block times $57.89 called the "basis average" 
          over the time the shares have been accumulated is an amount called 
          "W$", for example.
       
       D) "F$" plus "W$" then equals the amount in block #3.
       
       E) Thus it is up to you to enter the amount in block #3 into your 1040 
          form as best as you can either on line 16b (appears to the be 
          simplest method) or by using Schedule D and or using the 5 or 10 year 
          income averaging as the case may be.
    

This is my understanding of how this income should be reported 
(after reading the instructions several times).  Like the IRS, I 
don't claim that this is totally correct and can not be held 
liable for any mistakes.  If you're not sure about this, you can
call the IRS and ask them.  And, as always, "Consult your personal
tax advisor."  Now that the disclaimers are out of the way...

You could have done several things with the shares (income) from 
the ESOP.  How you report the income depends on what you chose to 
do.

Option 1  -- roll over into an IRA

If you rolled over the entire amount of the ESOP into a stock 
based IRA within 60 days of receiving the stock, you should 
report the total received on line 16a of Form 1040.  Line 16b 
(the taxable amount) is 0.  Tax will be deferred on this until 
you withdraw the funds.


Option 2 -- take the stock and check for partial shares, nothing 
sold yet

If you did not roll this income over into an IRA, you should 
report the amount in box 1 on line 16a and on line 16b.  You will 
therefore pay taxes on this amount, as ordinary income.  You 
won't be taxed on the capital gain until you sell the shares.


Option 3  -- take the stock and check for partial shares, sold 
some or all of the stock

If you have sold some or all of this stock, report the total in 
box 1 on line 16a and 16b. You will pay taxes on this income, as 
ordinary income.  

You will also need to complete Schedule D -- Capital Gains and
Losses to reflect the gain (or loss) on the sale of your stock. 
In column e -- cost or other basis, use the basis as indicated on
the form 1099, where it says "The basis of your x shares is
yy.yy."  In column d, use the amount you received for your
shares.  The difference represents the capital gain (or loss) on
your shares.  Use Part I for stock held less than six months,
Part II for stock held for more than six months. 

You will be taxed on this amount as a capital gain.  This year, 
with tax reform, that means essentially the same as ordinary 
income.


Hope this helps.

    	One addition...
    
   	 Capital Gains are taxed like regular income *for the most part*.
        
    	But... If your income puts you in bracket with a marginal tax
    rate greater than 28%, it capital gains are still taxed in a more
    favorable manner than regular income.  The Back of Schedule D contains
    a space to figure taxes on your capital gains.  Essentially you
    pay regular taxes on your regular income and max of 28% on capital
    gains.
                      
    	By the way, our local Finance type sent out a memo a couple
    of weeks ago warning us not to send our taxes in till we got this
    form.
    
    tlh
    
    

    I don't mean to sound ungrateful or anything, but...
    
    Let me take this opportunity to thank Digital for complicating
    the lives of tens of thousands of their employees.  Without
    any advance warning or notice, this form appears in the mail
    after we have reason to believe that everything is "in".
    The form not only contains no accompanying letter explaining
    what this thing is or what to do with it, but to boot contains
    a snide statement akin to "We do not provide tax advice.  Please
    consult with your personal tax advisor."
    
    *What* tax advisor?  I don't *have* a personal tax advisor, and
    neither do tens of thousands of others who work for this company,
    who now not only have to fill out long forms, but will have to
    pay a "personal tax advisor" and spend hours and hours of their
    own time on this nonsense.
    
    Lots of people like me don't get involved in the stock market
    precisely *because* we don't have the ability/time/money to
    complicate our financial lives this way.  But Digital has
    decided that I have to become a temporary Yuppie because it
    gave them a bigger tax break to give me 12 shares of stock
    than to just raise my salary, and then not even have the
    courtesy to explain how they were messing up my finances
    and tell me what I might do to untangle myself from this mess.
    
    Involvement in this whole kit-and-kaboodle should have been
    voluntary from the start.  Honestly, I'd have preferred not
    to have any part of it, and I'll bet so would thousands of
    others who aren't financial whizzies.
    
    Sorry for the minor flame, but this whole thing really ticks
    me off, and since I'm normally so mild-mannered, I figured
    I wasn't the only one, so perhaps some negative feedback
    would be appropriate.
    
    Chris

RE: .7  -< Involuntary stock tycoon-for-a-day >-
    
>    Let me take this opportunity to thank Digital for complicating
>    the lives of tens of thousands of their employees.  Without
>    any advance warning or notice, this form appears in the mail

    I have to disagree.  When the ESOP distribution was announced, they
    sent out a booklet outlining the choices available on how to receive
    the distribution.  This booklet told exactly what the tax consequences
    of each alternative would be.
    
>    I don't *have* a personal tax advisor [...] will have to [...]
>    spend hours and hours of their own time on this nonsense.
    
    Previous replies to this note have told exactly how this should be
    handled.  It really isn't difficult at all.
    
>    Involvement in this whole kit-and-kaboodle should have been
>    voluntary from the start.  Honestly, I'd have preferred not
>    to have any part of it, and I'll bet so would thousands of
>    others who aren't financial whizzies.
 
    Remember, ESOP's were a benefit.  Digital GAVE you extra money.
    However, if anyone would like to sign over their ESOP distribution,
    I'll gladly fill out your tax return.

    
    Chris, ,7,   suggestion or advice [that wasn't asked for:
    
    Why not sell your 12 shares and pay for a tax accountant this year
    to handle your tax forms.  If you have already filed before you
    received that statement, your tax accountant can file the neccessary
    correcting forms.
    Then donate the remaining 1200$ to charity.
    
    THANK YOU DIGITAL FOR COMLICATING MY LIFE.  You may do similiar
    anytime!  I *liked* the extra money!
    but I'm funney that way ;-)
    ed
    

    To be fair, I first thought as .7 did.   
    
    But, after hearing rumblings about this, I went back into my records
    and found a little blue handout that (presumably) we all received with
    the notice that the ESOP plan was folding.  Sure enough, there are
    words to the effect of "...you will receive a form 1099 from Digital
    indicating the value of the shares recieved."  
    
    So from their point of view, they did inform us. I've gotten in
    the habit of reading (if not remembering) every little thing that
    comes regarding stock plans, insurance, etc. after a rude surprise
    on how much more my HMO plan cost me a few years ago.
    
    Alternately, if I remember the rules of the ESOP, we would have been
    "surprised" in 5-7 years when the trust period ended anyway. The ESOP
    shares were being held in trust for us for some period of time, and
    that's why we haven't seen them to date. [This latter point probably
    belongs in, or is answered in BMT::INVESTING.]
                                                        
    There can be other surprises too: I'm glad that I haven't sent back my
    amended Mass. return yet, because I noticed in the Boston Globe today
    that the '86 Mass. tax cap credit is hiding in the middle of
    "adjustments to tax"! 

    I would like to thank those who responded to my original request.
    It should be straightforward now.  I didn't know which box to enter
    it in before.
    
    							Thanks,
    							-Dave

re: .4
>Option 3  -- take the stock and check for partial shares, sold 
>some or all of the stock
>
>If you have sold some or all of this stock, report the total in 
>box 1 on line 16a and 16b. You will pay taxes on this income, as 
>ordinary income.  
>
>You will also need to complete Schedule D -- Capital Gains and
...
>You will be taxed on this amount as a capital gain.  This year, 
>with tax reform, that means essentially the same as ordinary 
>income.
Arrrgggh!  Doesn't this mean i'm being charged for DOUBLE my
ordinary income (since i already reported the sale proceeds as
ordinary income on 16a/b)?

    The explanations left me slightly confused, but gave enough information
    to read the right sections of the 1040 instructions.
    
    The case I have is a total rollover of my ESOP into the Merrill
    Lynch IRA. [Actually, I was tardy to get the automatic handling
    by DEC's Investor Services, but the manager at ML said "make sure
    you send both the stock AND the full amount of the check" because
    you MUST do a total rollover. I did.] The key factor here is the
    phrase "total rollover."
    
    On page 11 of the instructions for form 1040 under lines 16a and
    16b is a section "Total Distributions From Profit-Sharing, Retirement
    Plans, and IRAs. ...a rollover from a qualified employer's plan
    to an IRA."
    
    "Rollover distributions are reported to you on Form 1099-R. For
    a rollover distribution, enter the total distribution...on line
    16a. If the total on line 16a was rolled over, enter zero on line
    16b."
    
    It would appear that no extra documentation is needed. Based on my past
    experience, if they question the data, they will send you a form.
    Usually it will claim that you owe huge amounts of taxes and you
    immediately get a heart attack (well, not really one...). I have gotten
    several of these over the years. Invariably for the ones I got a letter
    with explanation sufficed for them to clear it up without an in-person
    audit. However, if you want to avoid even this possibility, I suggest
    that a separate piece of paper attached to your 1040 with the
    explanation of the ESOP rollover to ML would suffice. Note, however,
    that the IRS will be getting upwards of 70,000 of these from Digital
    alone, and will probably figure it out without generating all this
    letter writing.
    
    FWIW--we did have an in-person audit a few years ago. They found
    enough additional deductions to give us an additional refund of
    over $300. And last year, a letter exchange resulted in another
    refund of some $300 plus $100+ of interest over several years. So
    all of our "heart stopping" interactions have actually ended to
    our benefit.

>>  Arrrgggh!  Doesn't this mean i'm being charged for DOUBLE my
>>  ordinary income (since i already reported the sale proceeds as
>>  ordinary income on 16a/b)?

    No. Basically, the "gain" up until the time of the distribution (the
    date the money/stock was placed into your name) was reported to
    you on form 1099. That goes onto line 16a and 16b of 1040 as regular
    income from the distribution. The "fair market value" as of that
    day then forms the "basis" for your stock. This becomes the basis
    on Schedule D. Then the gain/loss from that basis is the net capital
    gain/loss calculated on Schedule D.

    Thus, your total gain was the sum of the distribution gain (before
    June in this case) and the gain/loss since that date. The sum of
    these two is the total gain.  

    RE: .12, .14
    
    Just to clarify the point - the basis of your shares is listed on
    the 1099 form.  This is the amount that goes on Schedule D ("Cost
    or other basis") when you sell the shares.

    Stupid question of the day:
    
    THose of us who don't have anything to deduct, not many things anyway,
    who possibly wanted to fill out the ez or a form, can we still do
    it?
    
    	mike

re: .14

I may be seeing some light here at last!:^)  I multiplied
the 1099R Basis by the number of shares and added in the
amount they paid me for my partial share, and that came
out to be the Ordinary Income amount on the nose.

Since I sold the shares 3 days after getting them, do I
count all the capital gain as Short Term?  Or is there
some trickiness based on when DEC "bought" them for me
involved here (something that would require me to call
some of the gain Long Term and some Short Term)?
						Pc.

    Did anyone else also receive a form 1099B SUBSTITUTE?  I received
    one of these and none of the figures relate to the figures on the
    form 1099R.  The most confusing thing to me though is that my wife
    and I both received the form 1099R but my wife didn't receive a
    form 1099B SUBSTITUTE.  
    
    The only difference between my wife and I is that she left the company
    in October 1985.  Since she left in late October, after the annual
    distribution of ESOP shares, she had to wait until the next year
    to actually do anything with the shares.  In the end, she got her
    shares when everyone else did, when the plan was closed out.  So
    I don't understand why she didn't receive a form 1099B SUBSTITUTE
    or even what the purpose of that form is.
    
    Ya, I'm confused all right!
    
    
    							Garv 

    Someone earlier mentioned having professional help (tax person)
    deal with this form. I just want to mention that Saturday I had
    my taxes done by a CPA and she had not seen one before, even though
    she knew of them. I happened to have made a copy of a note that one
    of you noters put in here (thanks) explaining what investor services
    had said about them. I took that note with me and guess what? She
    used the instructions in the note to handle the form correctly!
    She also asked to keep the note for reference.
    
    							Art

    Does anyone know what line of the Massachusetts Form-1 to put the
    income?  I'm all clear on the Federal form, but Mass has one line
    for rollovers and one for disbursements.
    
    Elaine

    RE: .20
    
    The way I interpreted the Mass instructions, a distribution of this
    kind goes on "Misc. 5% Income" (can't remember the line number).
    
    -db

     The 1099B substitute form appears to be generated by Investor
Services to report the proceeds of stock sales that they make on
our behalf.  Apparently, this is the first year that they have
issued them.  My particular 1099B substitute shows the right
numbers for the sale of some stock bought through the Employee
Stock Purchase Plan.  In my case, the 1099R shows ESOP related
information and the 1099B shows ESPP information.

    One more question. Is the "ordinary income" on form 1099R from
    a "qualified pension plan". That is, since I'm younger than
    59.5, is this a "premature
    distribution" which is subject to an additional 10% tax
    penalty. The 1040 form instructions get real confusing for
    lines 16. They point you to yet another form which you need
    to fill out, so that you get hit with a 10% penalty if you received
    a premature distribution on this money.
    Confused? I am.
    
    thanks for any help,
    mike

    I'd like to hear an answer to the question posed by MERCY::CONNELLY 
    in .17, especially since I did the exact same thing:

	From .17:
	> Since I sold the shares 3 days after getting them, do I
	> count all the capital gain as Short Term?  Or is there
	> some trickiness based on when DEC "bought" them for me
	> involved here (something that would require me to call
	> some of the gain Long Term and some Short Term)?
	>					Pc.

    I'd personnaly like to call the shares from 1983-1986 LONG TERM gains.  
    Does anybody know the answer?  

    -- Jim

Re: Note 455.19   FIDDLE::RAICHE "Color me RED" 


>    Someone earlier mentioned having professional help (tax person)
>    deal with this form. I just want to mention that Saturday I had
>    my taxes done by a CPA and she had not seen one before, even though
>    she knew of them. I happened to have made a copy of a note that one
>    of you noters put in here (thanks) explaining what investor services
>    had said about them. I took that note with me and guess what? She
>    used the instructions in the note to handle the form correctly!
>    She also asked to keep the note for reference.
>    
>    							Art


Ummm, isn't this a violation of one of the ground rules of this 
conference?  Specifically, note 1.7  by HUMAN::CONKLIN "Peter Conklin" 
which states that:


>    This conference and all the notes and replies are 
>    
>    
>    *************************************
>    *                                   *                         
>    *     Digital Internal Use Only     *                         
>    *                                   *                         
>    *************************************

re .-1

Woe to anyone who were to show something which was actually "Digital Internal
Use Only" to someone on the outside.

However, the words "Digital Internal Use Only" clearly do not make something
as *obviously* not "Digital Internal Use Only" as instructions on how to
complete tax forms "Digital Internal Use Only."

Thank you for your concern.

/john

    re: .26 [Covert]:
    
    I don't recall any provisions in the Corporate Proprietary Information
    Protection Policy for the recipient of a classified document to
    alter or ignore the classification.

Re: .26 by COVERT::COVERT "John R. Covert" 

My concern is not that proprietary information may be
communicated with non-Digital personnel.  I agree that help in
completing tax forms is generally not Digital proprietary 
information.  

My concern relates more to the issue of the stated ground rule
for this conference being that it is for internal use only.  This
certainly indicates that information in this notesfile should not
be shared with people outside the company, whether it is deemed
proprietary or not.   Therefore, people contributing to this file 
may reasonably expect that their notes will not be distributed 
outside Digital by readers of this conference.

Digital may not care about this particular instance because
proprietary information was not disclosed.  However, were I the
author of the note which was given to the CPA, I would be upset
that this information was used without my consent.  In
particular, this person is now using information freely given to
complete tax forms for which she will be paid.  What if there's
a problem with any tax forms completed with this information? 

Maryellen

As happens often, reality and the "letter of the law" are in conflict.  They
have to be; it you took "inernal use only" literally, it would apply not to
the exact WORDS in the notes, but to the MEANING.  Would you have objected
if someone paraphrased the contents of a note and gave it to their accountant?

Something posted in a notesfile like this is visible to thousands of people.
It may not be "public" in a technical sense, but it's not "private" either - you
can have no "reasonable expectation of privacy" with respect to a note in a
broadly-accessible notesfile.  It is common practice for people to copy notes
to other notesfiles where they seem relevent.  It is even more common for
them to provide pointers, so that a note may become very widely read even if it
is never actually copied.  There IS a difference between these two, since the
original author can withdraw the note he wrote, but not the copies, but the
evolving ethos of Notes usage seems to accept copying, just as people accept
the right to make a copy of a message posted on a (physical) bulletin board -
the issues involved being very similar.

The fact is, there was nothing in the note cited that was, in and of itself,
private, propiretary, or in need of protection.  Not only was there nothing
of that sort there, but these facts were clear; there really was no reasonable
basis for questioning them.  In posting the information here, the author, in
practice, gave up any special rights to the information - not that it's likely
that any could have existed in the first place.

The note was NOT written as the word of an expert; it wast not sold, or even
given, as expert, authoritative advice.  As a result, no one harmed by acting
on that advice has any complaint against the poster.

I have to agree with John Covert:  I see no problems IN THIS PARTICULAR IN-
STANCE.
							-- Jerry
				(Who, as far as he can determine, was the
				 instigator of the "INTERNAL USE ONLY" notices
				 you see on notesfiles.)

    Wow, I just now have seen the responses to my note. In a way I
    am glad I didn't see it sooner as several people have clarified
    the action much better than I could have done.
    
    To clarify since my entry. My CPA returned the document to me
    after absorbing the appropriate content. I felt no particular
    concern at sharing the information with her as I felt that had
    I called Investor Services myself, I would have received the
    information directly and subsequently given it to the CPA. The
    information was provided to us for our tax preparation purposes
    and I have to assume that Invester Services knew that in some
    cases would be shared with professional tax preparers (we all
    don't do our own). 
    
    I respect the concern of using a copied note outside of DEC
    and will, wether required to or not, check with the author in
    the future before using it. It was curious to me that no one
    asked wether or not I had gotten permission to do so, but
    rather assumed I had not when they responded here.
    
    					Sorry for the anxiety created,
    
    
    							Art
    

    To return to a topic less tangential, let me ask if any readers
    *know* exactly what DEC reports to the I.R.S. on their 1099 Substitute?
    We receive a form full of figures, but I.S. reports a single "bottom
    line total" to the I.R.S.
    
    (I could call up I.S. but don't want to annoy them with yet another
    tax question, and whoever answers may respond incorrectly anyway.
    Perhaps some noter already knows fer sure).
    
    Why does this matter?  Consider the following fragment of a
    hypothetical 1099 Substitute as received from DEC: 
    
	"I.S. 1099 SUBSTITUTE"
    
    Gross	Commis-	   SEC
    Sales	sion      taxes
    
    $ 8,192.00	$3.50	  $.80
    $ 1,808.00	$1.50	  $.20
    
    Totals are:
    $10,000.00  $5	$1
    
    Now the question is, does I.S. report to the I.R.S. that I sold
    stock in the amount of $10,000 or $9,9994?  (The latter being the
    actual proceeds I received...hypothetically)
    
    The difference may seem minor, but is important because the I.R.S.
    computo-matching will accept one figure and reject the other.
    Usually a stockbroker will report the net proceeds; the DEC form
    SAYS it reports the gross but then goes on to say that if you want
    credit for _local_ taxes you have to itemize (the implication being
    that they report the equivalent of $9,994 just like other brokers;
    it's "Gross" in the sense that it doesn't subtract your basis).
    
    With 1987's taxes as messed-up as they are, I'd much prefer to see
    the I.R.S. computers go after the real tax frauds.  Hey, I'll fill
    out the forms according to whichever reporting method was used,
    but need to *know* what number gets reported.  "Close" is not good
    enough in this case, unless it rounds to the same dollar accuracy.
    
    Anybody else who sold ESPP (not ESOP) in 1987 is in the same boat
    (glug, glug) and should be similarly concerned.  No, INVESTING doesn't
    already discuss this.  This is not a "how to calculate taxes" question,
    it is a "What does Digital report to the I.R.S.?" question.

    Anybody know?
    
      John

    Well, this is the info that I got from my 'source' at IS. The 1099B
    (substitute) is a paper copy provided to the individual of the info
    that is transmitted to the IRS via magnetic tape. All of the info
    on the form is reported. The instructions on the back of the form
    indicate that you want to use the gross value number. The IRS doesn't
    care how much your broker charged to handle the transaction or what
    'local taxes' you paid, they only want to know how much the stock
    was worth.
    
    Bob Mc

>    indicate that you want to use the gross value number. The IRS doesn't
>    care how much your broker charged to handle the transaction or what
>    'local taxes' you paid, they only want to know how much the stock
>    was worth.
    
    Thanks for the info, but I have to disagree on the fine(al) point.
    You get to subtract all commissions, taxes and base cost before
    coming up with your profit (loss) figure.  The only question is
    if I.S. subtracted commissions etc. from sales price before reporting
    the data, or after.  ("After" was the form my other brokers used)
    From what you say, I agree that the gross seems the way to go. 
    But O does this bode ill for ESPP sales!  I don't think the I.R.S.
    is prepared to handle data in the form I.S. is handing them...
    
      John

    re: .24
    
    To get back to the comment about long vs. short gain...
    
    I agree with you, but for 1987 it doesn't matter.  They both get
    added together before the tax is computed, with no discounts or
    penalties.  The form just looks the same so they can figure how
    much more money they are making under the new tax plan.
    
    Elaine

    RE: .33  -  how to subtract commissions
    
    I believe you add the commissions to the "cost basis" of your
    shares.  This is the same as subtracting them from the sale price.
    
    I haven't done my taxes yet, but this is what I remember from the
    last time I sold some DEC stock.
                      --tom

	Wow, how many notes are under this topic?

	re: .34, Elaine 
	<    I agree with you, but for 1987 it doesn't matter.  They both get
	<    added together before the tax is computed, with no discounts or
	<    penalties.  The form just looks the same so they can figure how
	<    much more money they are making under the new tax plan.

	I have to diagree.  If your taxable income is over the 28% mark before
	long-short term capital gains is accounted for, then it *does* matter.

	If you are in that boat, then you don't have to pay the 35% for any
	shares that you sold as *long term gain*; you pay only 28% on those.
	You still pay 35% on the short term gain.  This is what the first
	section does on the back of Schedule D does ... "Alternative tax method"
	(or something like that).

	For instance, if you sold $2000 worth of stock which you held for more
	than 6 months, and $1000 which you held for less:  You pay full tax 
	(35%) on the $1000, but "only" 28% on the $2000.  This will save 7% 
	of $2000, or $140 on your taxes.

	Did anybody that sold their ESOP shares put the sale of them as 
	short term?  Are you hiding from the IRS?  8^)

	-- Jim

    Re: .36
    
    I stand corrected.  I went through the form with real numbers this
    time.  Schedule D takes care of this, and did indeed save me money.
    
    Elaine
    

    
    I finally waded through the forms last night.  I think (.4) is slightly
    incorrect about 16a and 16b, based on what I learned in INVESTING
    note 451, and the instructions.
    
    In a nutshell:
    
    ** If you took the stock, i.e. did not rollover:
    
    	Write 1099R Box 1 number in 1040 line 16b only.  This is a lump-sum
        distribution.  This will add it to your income and make the
        IRS happy.  No other action necessary.
    
        In Mass Form 1, the amount gets added to line 10.  It is not part of
        line 3, which comes from 1040 line 16a.
    
    ** If you rolled over:
    
    	Write 1099R Box 1 number in 1040 line 16a.  Write "0" in line
        16b.
    
       [I didn't do this, so I don't know what happens on Mass Form
        1].
    
    Hope this helps.  If it's wrong, correct me and I'll delete it.
    38 replies is a lot to read (there are 102 in INVESTING!), in addition 
    to the tax forms!
    
    Elaine
    
    

	Re: Elaine,    

	< I stand corrected.  I went through the form with real numbers this
	< time.  Schedule D takes care of this, and did indeed save me money.

	Glad I could help!  I only wish I had read .38 before I sent in
	my tax form!  I went to (dare I admit it?) H&R Block and they seemed
	to really screw it up, but the numbers came out right, so I left it.

	What they did (and this totally confused me, but they are the 
	'experts') is put the lump sum on line 16b then included a form
	(don't remember the details here) titled something like: "Premature
	disbursements from a qualified IRA".

	In that form, something in the 8000s, they put down that the lump
	sum was not subject to the 10% penalty of early withdrawal from a
	qualified pension plan because of Section 72(c)(2)(t).  They claimed
	that they have done 100s of these for Dec employees the same way,
	so I have nothing to worry about.

	Hope I get my refund!
    
	-- Jim

    Well, I have been reading this note for several weeks now, hoping
    I would see the light.  But, a financial wizard I am not and I am
    still confused.  If I get specific, can someone please advise me.
    
    I sold all my ESOP shares (16 of them) on 5/27/87.  My 1099-R has
    $983.29 in block 1 and block 3 and $1,719.68 in block 6.  It declares
    the basis of my 16 shares was $57.77 per share.
    
    My 1099B Subsittute shows sale date (Am I wrong to declare ALL as
    LONG TERM?), sale price of $159.625 per share and GROSS PROCEEDS
    are $2,554.00, commissions $3.20 and SEC TAX .09....
    
    I put the 1099-R, block 3 total, ($983.29) on 1040 line 16b.  
    
    On Schedule D, I put GROSS Proceeds (1099B) on line 1.
    I put the sale of 16 shares DEC common stk and CUSIP no. on 9a col
    (a); date in col (c); (what date for col. (b)???);  $2554.00 (gross)
    in col (d); 924.32 (total basis) in col (e) and the gain in col
    (g).  This gain also went on lines 16, 17, and 18 of Sched D.
    
    Quest.  Am I REALLY SUPPOSED to add the Commissions (3.20) to the
    BASIS?  What do I do with the SEC TAX ($.09)?  Does anybody (besides
    me and the IRS even CARE?
    
    Where can I find out how much the I.S. folks sent me last May for
    the partial share they paid?  Or is that the difference between
    the $1629.68 GAIN on line 14 and the amount reported in box 6 of
    the 1099-R?
    
    
    HELP PLEASE!!!
    
    John

Every year I take all my stuff like this to my tax accountant and tell him
"take care of this".  He cheerfully says "no problem".  After a while I
receive my tax returns printed on his computer (12 pages long last year)
which I sign and mail in.  For this I pay $100 (tax deductable).  Worth
it.

Re .41:

> which I sign and mail in.  For this I pay $100 (tax deductable).  Worth
> it.

	I'll agree that it is worth it but it is not tax deductible in most 
cases any more.  That is one of the 'loopholes' that they closed.